Question 1

The notice required of a dishonored check from the drawer to an indorser to hold the indorsers to their contractual obligation can be either written or oral.

Accepted Answer

A) True 
 B)False

Question 2

An indorsing transferor of a negotiable instrument makes six transfer warranties to all subsequent transferees.

Accepted Answer

A) True 
 B)False

Question 3

Maya Efrat,Chief Financial Officer for BAZ Inc. ,is authorized to sign checks for BAZ.She signs a check "BAZ Inc.by Efrat,Chief Financial Officer." Which of the following statements is most accurate?

Accepted Answer

A) Maya and not BAZ Inc.is liable on the check. 
B) BAZ Inc.and not Maya is liable on the check. 
C) Both BAZ Inc.and Maya are liable on the check. 
D) Neither BAZ Inc.nor Maya are liable on the check.

Question 4

If a person signs a check as an accommodation indorser:

Accepted Answer

A) his contractual liability is that of an indorser. 
B) his contractual liability is limited to the payment of the principal. 
C) his contractual liability is more than that of an indorser. 
D) his contractual liability is limited to the payment of the interest.

Question 5

Salmond signs a note for the purpose of lending credit to John.Salmond also makes his father Richard sign the note because of his shaky financial condition.This indicates that Richard has signed the note in the capacity of a(n):

Accepted Answer

A) drawer. 
B) accommodation party. 
C) drawee. 
D) indorser.

Question 6

The rationale for the fictitious payee rule is that:

Accepted Answer

A) the bank should bear the immediate loss of the forged instruments. 
B) the holder in due course should bear the immediate loss of the forged instruments. 
C) the employer of the wrongdoer should bear the immediate loss of forged instruments. 
D) the wrongdoer should bear the immediate loss of the forged instruments.

Question 7

Tom steals Dave's checkbook, writes a check for $1,000,forges Dave's signature,and receives payment from Tom's bank.The bank paid in good faith.Who is liable to the bank for the $1,000 in this case?

Accepted Answer

A) Tom 
B) Dave 
C) Both Tom and Dave 
D) Neither Tom nor Dave

Question 8

Chin wants to buy a small parcel of land.The seller requires a certified check as payment.Chin has a checking account with ABC bank;he prepares a check for the seller and then has the bank certify it.He then presents the check to the seller.Who may now be liable for payment of the amount of the check?

Accepted Answer

A) Chin only 
B) ABC bank only 
C) Both Chin and ABC bank 
D) Neither Chin nor the ABC bank

Question 9

The ________ of a certified check has the same obligation as the maker or issuer of a note.

Accepted Answer

A) assignee 
B) maker 
C) holder 
D) drawer

Question 10

Which of the following is not one of the presentment warranties that the holder of an unaccepted draft makes to the drawee?

Accepted Answer

A) That the draft has not been altered. 
B) That the draft is not subject to a defense or a claim in recoupment. 
C) That the holder has no knowledge that the signature of the drawer is unauthorized. 
D) That the holder is entitled or authorized to obtain payment.

Question 11

Presentment warranties are made by any prior transferor of the instrument at the time the person transfers the instrument.

Accepted Answer

A) True 
 B)False

Question 12

According to UCC section 3-401 which of the following does NOT constitute a valid signature of a negotiable instrument?

Accepted Answer

A) A mark on the document 
B) A word on the document 
C) Leaving the document intentionally blank 
D) Printing the name on the document

Question 13

Mike signs a note payable to a bank.The bank indorses and negotiates the note to Fay,who then indorses and negotiates it to Sam.Sam presents the note to Mike,who dishonors it.Then Sam decides to pursue Fay and the bank on their secondary indorsers' liability.Against whom can Sam proceed?

Accepted Answer

A) Fay 
B) The bank 
C) Both Fay and the bank 
D) Neither Fay nor the bank

Question 14

Bill submits a time card for a non-existent employee.The employer issues the payroll check.Bill forges the indorsement and negotiates the check to Ted.Which of the following statements is true?

Accepted Answer

A) The loss from the forged check is borne by the holder in due course. 
B) The check cannot be negotiated as it carries the signature of a non-existent person. 
C) The employer has the right to refuse payment to Ted. 
D) Ted submits the check to the employer and receives the face amount.

Question 15

Dick steals a computer belonging to Tom from his house.Then Dick represents himself as Tom and sells the computer to Lawrence.Here,Lawrence draws a check payable to Tom and delivers the check to Tom.Here,Tom is called the impostor.

Accepted Answer

A) True 
 B)False

Question 16

According to Revised Article 3 of the UCC,the risk of loss from fraudulent indorsements by employees:

Accepted Answer

A) should fall on the holder in due course. 
B) should fall on the employer. 
C) should fall on the bank. 
D) should fall on the employee.

Question 17

The UCC provides for a transfer warranty on unauthorized or repetitive remotely created checks.

Accepted Answer

A) True 
 B)False

Question 18

A representative is personally liable to a holder in due course that took the instrument without notice that the representative was not intended to be liable if:

Accepted Answer

A) the instrument identifies the represented person. 
B) the form of the signature does not show unambiguously that the signature was made in a representative capacity. 
C) the instrument categorically states that the representative would be liable even if the signature has been authorized. 
D) it is proved that the original parties did not intend her to be liable on the instrument.

Question 19

If Jay signs Mila's name to a negotiable instrument without Mila's authorization or approval:

Accepted Answer

A) the signature is not effective as the signature is of the unauthorized signer. 
B) the signature cannot be ratified later by the person represented. 
C) the signature does not bind the person whose name appears. 
D) Jay is not liable on the check.

Question 20

Which of the following is both a transfer warranty and a presentment warranty? Assume that the instrument in question is a draft.

Accepted Answer

A) That the draft has not been altered. 
B) That the draft is negotiable. 
C) That the draft is not subject to any defense or claim for recoupment. 
D) That the drawer is not insolvent.

Exam 33: Liability of Parties

The notice required of a dishonored check from the drawer to an indorser to hold the indorsers to their contractual obligation can be either written or oral.

An indorsing transferor of a negotiable instrument makes six transfer warranties to all subsequent transferees.

Maya Efrat,Chief Financial Officer for BAZ Inc. ,is authorized to sign checks for BAZ.She signs a check "BAZ Inc.by Efrat,Chief Financial Officer." Which of the following statements is most accurate?

If a person signs a check as an accommodation indorser:

Salmond signs a note for the purpose of lending credit to John.Salmond also makes his father Richard sign the note because of his shaky financial condition.This indicates that Richard has signed the note in the capacity of a(n) :

The rationale for the fictitious payee rule is that:

Tom steals Dave's checkbook, writes a check for $1,000,forges Dave's signature,and receives payment from Tom's bank.The bank paid in good faith.Who is liable to the bank for the $1,000 in this case?

The ________ of a certified check has the same obligation as the maker or issuer of a note.

Which of the following is not one of the presentment warranties that the holder of an unaccepted draft makes to the drawee?

Presentment warranties are made by any prior transferor of the instrument at the time the person transfers the instrument.

According to UCC section 3-401 which of the following does NOT constitute a valid signature of a negotiable instrument?

Mike signs a note payable to a bank.The bank indorses and negotiates the note to Fay,who then indorses and negotiates it to Sam.Sam presents the note to Mike,who dishonors it.Then Sam decides to pursue Fay and the bank on their secondary indorsers' liability.Against whom can Sam proceed?

Bill submits a time card for a non-existent employee.The employer issues the payroll check.Bill forges the indorsement and negotiates the check to Ted.Which of the following statements is true?

Dick steals a computer belonging to Tom from his house.Then Dick represents himself as Tom and sells the computer to Lawrence.Here,Lawrence draws a check payable to Tom and delivers the check to Tom.Here,Tom is called the impostor.

According to Revised Article 3 of the UCC,the risk of loss from fraudulent indorsements by employees:

The UCC provides for a transfer warranty on unauthorized or repetitive remotely created checks.

A representative is personally liable to a holder in due course that took the instrument without notice that the representative was not intended to be liable if:

If Jay signs Mila's name to a negotiable instrument without Mila's authorization or approval:

Which of the following is both a transfer warranty and a presentment warranty? Assume that the instrument in question is a draft.